New research from CBIZ and Paychex, released last week, paints a picture of the small business community that some may find concerning. But the news isn’t all bad: Wells Fargo and ADP also released data last week that suggests small business optimism persists despite the hiring stall, once again proving that the outlook for SMBs is rarely black and white.

Job Growth Stalls

According to CBIZ’s latest Small Business Employment Index, hiring took a nosedive in July for businesses that hire 300 or fewer, with hiring activity dropping 2.26% during the month. Researchers said this is particularly concerning considering record-breaking increases in hiring activity for June.

“Small businesses are yet to demonstrate their desire to hire employees on a consistent basis and are instead hiring in pulses,” said CBIZ Employee Services Organization President Philip Noftsinger in a statement. “The reasons behind this likely vary from a declining confidence in the U.S. economy to sustainably grow, to the inability of Congress to make discernible progress on fiscal policy decisions that will impact employee healthcare costs.”

CBIZ’s findings were supported by separate research from the Paychex | IHS Markit Small Business Employment Watch report, also released last week, which surveys businesses with fewer than 50 employees.

In that analysis, Paychex recorded a 0.7% drop in the index year-over-year for July, though certain industries – namely “other services” and construction – saw strong hiring activity.

“It’s a continuation of a trend we’ve seen now for the last several months,’said Frank Fiorille, Paychex’s vice president of risk, compliance and data analytics, in a statement. “We’re seeing it still growing, but the growth has really slowed.

“It feels like there is some hesitation with businesses adding employees based on a number of reasons, but most importantly they’re hesitating to see what comes out from high-level legislation, whether it’s healthcare or tax” reform, he said.

Optimism Persists

While small business hiring slumped in July, overall, payroll company ADP found job growth to be strong.

“However, as the labor market tightens, employers may find it more difficult to recruit qualified workers,” said Ahu Yildirmaz, ADP vice president and co-head of the firm’s Research Institute.

ADP found the U.S. private sector added 178,000 jobs in July, with 50,000 of them going to small businesses (companies with fewer than 50 employees) and 83,000 landing at medium-sized businesses (companies with between 50 and 499 employees).

And though job growth may have slowed for SMBs last month, a separate report from Wells Fargo says small businesses are actually more optimistic now than ever. The Wells Fargo/Gallup Small Business Index, which surveyed small businesses with annual revenue of $20 million or less, found small firms to be the most optimistic they have been in a decade.

According to the report, 76% said their current financial position is either very good or somewhat good. Nearly half (46%) said revenue has increased over the last year, with 48% reporting that access to credit is somewhat easy or very easy. More than one-fifth said they have increased hiring at their companies over the last year.

“Our latest survey tells us that small business owners continue to feel confident about their current situation and are optimistic about the future,” said Wells Fargo Managing Director and Senior Economist Mark Vitner. “As the economy strengthens, small business owners are reporting improvements in their day-to-day operations, particularly their sales.

“With their finances in better shape and fewer business owners expressing concern about the regulatory environment, more businesses are planning to boost capital spending and hiring,” he continued. “It’s reassuring to see these improvements, and to see that optimism has returned to its highest level since early 2007.”